Reimbursements can be tricky—and costly if there is no written policy for substantiating business use.

Warning:

• For the IRS, reimbursement errors are low hanging fruit for its auditors. And it is not just the IRS who is looking at your policy.
• With many jobs now remote or hybrid, employees and applicants are aware of your policy.
  
  

Three years ago, the Tax Cuts and Jobs Act (TCJA) took internet use off listed property—luxury property— which, when used for business, has heightened substantiation requirements.

Ever since, the American Payroll Association has been asking the IRS which reimbursement rules apply to employer-paid internet access. The new IRS answer: The IRS chief of employment tax examination in the Small Business/Self-Employed Division says you can reimburse employee home internet access as a business expense—if you use accountable plan rules, which are as follows:

• Employees must have a business connection for accessing the internet. The good news: The simple fact that the employee is working at home fits the “business connection” requirement.
  
  
• Employees must substantiate business use by providing you with substantiation of their internet use. The good news: All they need to do is show you their cable or phone bill and the percentage used for business.
  
  

Employees must return excess reimbursement within a reasonable period of time.

If you need help with any of this, please contact me at kjohnson@proactbookkeeping

Reprinted by permission of the AIPB